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The Development of Annual and Peak Gas Demand Forecasts for the Western Australian Gas Market

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The Development of Annual and Peak Gas Demand Forecasts for the Western Australian Gas Market F, REPORT 4 DECEMBER 2017 THE DEVELOPMENT OF ANNUAL AND PEAK GAS DEMAND FORECASTS FOR THE WESTERN AUSTRALIAN GAS MARKET Prepared for the Australian Energy Market Operator Marsden Jacob Associates Financial & Economic Consultants ABN 66 663 324 657 ACN 072 233 204 Internet: http://www.marsdenjacob.com.au E-mail: [email protected] Melbourne office: Postal address: Level 4, 683 Burke Road, Camberwell Victoria 3124 AUSTRALIA Telephone: 03 9882 1600 Facsimile: 03 9882 1300 Perth office: Level 1, 220 St Georges Terrace, Perth Western Australia, 6000 AUSTRALIA Telephone: 08 9324 1785 Facsimile: 08 9322 7936 Sydney office: 119 Willoughby Road, Crows Nest New South Wales, 2065 AUSTRALIA Rod Carr 0418 765 393 Authors: Grant Draper [email protected] Phil Jones [email protected] Peter McKenzie [email protected] Hana Ramli [email protected] This report has been prepared in accordance with the scope of services described in the contract or agreement between Marsden Jacob Associates Pty Ltd ACN 072 233 204 (MJA) and the Client. Any findings, conclusions or recommendations only apply to the aforementioned circumstances and no greater reliance should be assumed or drawn by the Client. Furthermore, the report has been prepared solely for use by the Client and Marsden Jacob Associates accepts no responsibility for its use by other parties. Copyright © Marsden Jacob Associates Pty Ltd 2017 Australian Energy Market Operator 2. Gas Demand Forecasts TABLE OF CONTENTS Introduction .................................................................................................................. 6 1.1 Background ................................................................................................................................. 6 1.2 Scope of Work ............................................................................................................................. 6 1.3 Purpose of this Report ................................................................................................................. 7 1.4 Outline of Report ......................................................................................................................... 7 Gas Use in Western Australia .......................................................................................... 8 2.1 Introduction ................................................................................................................................ 8 2.2 Annual Gas Demand in WA .......................................................................................................... 8 2.3 Peak Day Gas Demand .............................................................................................................. 10 Drivers of Gas Demand in WA ....................................................................................... 11 3.1 GPG in the SWIS ......................................................................................................................... 11 3.1.1 Relationship between GPG Gas Use and Electricity Demand Forecasts ...................................... 12 3.2 Mining ........................................................................................................................................ 13 3.3 Mineral Processing .................................................................................................................... 16 3.4 Industry ...................................................................................................................................... 17 3.5 GPG for NWIS and Regional Centres – Residential and Business Demand ................................... 18 3.6 Other SWIS Gas Demand ........................................................................................................... 19 3.7 Drivers of Segment Growth in GPG Non-SWIS and Other SWIS ................................................. 20 3.7.1 Population Growth .................................................................................................................... 20 3.7.2 Household Income ..................................................................................................................... 22 3.7.3 Economic Drivers ....................................................................................................................... 22 3.7.4 Retail Gas Prices ........................................................................................................................ 23 3.8 Weather .................................................................................................................................... 24 3.9 New Projects ............................................................................................................................. 25 SWIS GPG Gas Use Forecasting Methodology ............................................................... 27 4.1 Key Drivers ................................................................................................................................. 27 4.2 Modelling Approach ................................................................................................................... 27 4.3 Modelling Assumptions ............................................................................................................. 28 4.4 Normalised Load Duration Curve (LDC) for Annual and Monthly Load Forecasts ......................... 31 4.5 Determining Gas Usage on the Peak Gas Days ............................................................................ 31 Annual and Monthly Demand Forecast Methodology for Gas Use Segments ................... 33 5.1 Introduction ............................................................................................................................... 33 5.2 Mineral Processing and Industry Gas Use Segments .................................................................... 33 5.3 Mining ....................................................................................................................................... 34 5.4 GPG for NWIS and Regional Centres – Residential and Business Demand .................................... 35 5.5 Other SWIS ................................................................................................................................ 35 5.6 Gas Shipping (transmission)....................................................................................................... 42 Developing Peak Demand Forecasts ............................................................................. 45 Annual Average Gas Demand Forecasts ........................................................................ 48 7.1 Gas Use Scenarios ..................................................................................................................... 48 7.2 Average Daily Gas Demand Forecasts ........................................................................................ 48 Australian Energy Market Operator 3. Gas Demand Forecasts Peak Demand Forecasts ............................................................................................... 51 8.1 Summer Peak Demand Forecasts ............................................................................................... 51 8.2 Winter Peak Demand Forecasts ................................................................................................. 54 Appendix One: SWIS GPG Modelling Assumptions ........................................................ 58 A1. Inflation ..................................................................................................................................... 58 A2. Exchange Rates ......................................................................................................................... 58 A3. Environmental Policies .............................................................................................................. 58 A4. Demand and Consumption Forecasts......................................................................................... 59 A5. WEM Plant Retirement Decisions .............................................................................................. 61 A6. Fuel Prices ................................................................................................................................ 61 TABLE OF FIGURES Figure 1: End User Daily Gas Consumption (TJ/day) .............................................................................................. 10 Figure 2: Operational Consumption Forecasts for the WEM .................................................................................. 13 Figure 3: Average Gas Demand for Iron Ore Mines in WA ...................................................................................... 14 Figure 4: Mining Gas Consumption (Non-SWIS) – TJ/day ...................................................................................... 15 Figure 5: Commodity Price Index and Mining Gas Consumption ............................................................................ 15 Figure 6: Alumina Gas Use in Western Australia .................................................................................................... 16 Figure 7: Alumina Gas Usage Profiles: Historical and Average (2013 to 1017) ......................................................... 17 Figure 8: Gas Consumption by Major Industry Users ............................................................................................. 18 Figure 9: GPG
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